Elise Entertainment is a progressive company that is considering the implementation of activity-based costing techniques to better understand and control costs associated with its human resources (HR) department. Currently, the department incurs annual costs of $750,000. Claire Elise, the company’s president, believes there are four primary activities within the department: recruiting new employees, responding to employee questions about benefits, general employee administration, and employee termination/separation. She asked the HR manager to identify possible drivers and costs associated with each of these activities.
The manager provided the following data:
The HR manager determined that in the most recent year there were 2,000 applications received; 2,400 benefits-related questions from employees; an average monthly employment of 600 individuals; and 100 employees who were either terminated or otherwise left the company.
A. Estimate the overhead cost for each activity.
B. Which activity is the most expensive and which is the least expensive?